Real Estate and Mortgage Information with a Tradition of Sound Advice… And a Reputation of Successful Results.

Monday, August 25, 2014

What's Ahead For Mortgage Rates This Week - Aug 25, 2014

Last week's economic news brought several reports related to housing. The National Association of Home Builders (NAHB) Wells Fargo Housing Market Index for August rose by two points to 55, which was its highest reading in seven months.

Components of the NAHB HMI include builder surveys on conditions related to upcoming sales of new homes, which rose by two points for a reading of 65. Builder sentiment concerning present sales conditions also rose by two points to 58.

According to the Commerce Department, housing starts and building permits rose in July. Housing starts increased to 1.09 million from June's reading of 945,000 and exceeded expectations of 975,000. This reading reflects higher builder confidence and could contribute to easing demand for housing as new homes expand the inventory of available homes.

Construction of single family homes accounts for about 75 percent of new home construction. July's reading was 656,000 single family housing starts on an annual basis. Regionally, housing starts declined by 25 percent in the Midwest, but rose by 44 percent in the Northeast, 29 percent in the South and 18.60 percent in the West.

Building permits issued in July rose to an annual rate of 1.05 million, which was an increase of 8.10 percent over June's reading of 973,000 permits issued. Permits for single family homes increased by 0.90 percent to a reading of 640,000 permits annually.

July's readings for housing starts and building permits are in line with overall economic growth and suggest that housing markets may improve in coming months as the supply of new homes increases.

Let's add more icing to the cake. The National Association of REALTORS® reported that existing home sales rose to 5.15 million on a seasonally adjusted annual basis against predictions of 5.00 million existing homes sold and June's reading of 5.05 million sales of previously owned homes.

Mortgage Rates Fall, FOMC Minutes Indicate Economic Improvement

Freddie Mac's weekly survey of mortgage rates reported that average rates fell across the board: The average rate for a 30-year fixed rate mortgage dropped by two basis points to 4.10 percent with discount point lower at 0.50 percent.

The rate for a 15-year mortgage dropped by one basis point to 3.24 percent with discount points unchanged at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage dropped by two basis points to 2.95 percent with discount points unchanged at 0.50 percent.

The Federal Open Market Committee (FOMC) of the Federal Reserve released minutes from its July meeting. Highlights included the committee's 9-1 vote in favor of continuing the slow pace of reducing economic stimulus.

The minutes indicated that the committee intends to keep the federal funds rate below normal levels for "some time." Previous FOMC statements have consistently indicated the Fed's intention to maintain very low short-term interest rates after asset purchases under QE3 end in October, but FOMC has not released a specific time frame or details of its intentions concerning the federal funds rate.

The Fed acknowledged economic improvements, but cited lingering concerns over unemployment, which remains higher than average.

More Good News: Jobless Claims Lower, Economic Indicators Up

Weekly jobless claims fell to 298,000, lower than expectations of 300,000 new jobless claims and the prior week's reading of 312,000 new claims. Leading economic indicators (LEI) rose by 0.89 percent in July after increases in May and June. Analysts interpreted this reading as a further indication of stronger economic conditions.

What's Ahead

This week's scheduled economic reports include New Home Sales, the Case-Shiller Home Price Index and FHFA House Price Index. General economic reports include the Consumer Confidence Index and the University of Michigan Consumer Sentiment Index. It will be interesting to see whether consumer views of the economy are consistent with recent economic improvements.

MEDIAN PRICE FOR ATLANTA HOMES

INVENTORY FOR ATLANTA HOMES

AVERAGE DAYS ON MARKET FOR ATLANTA HOMES

MARKET STRENGTH FOR ATLANTA REAL ESTATE

The chart above, Market Action Index (MAI), illustrates the balance between supply and demand using a statistical function of the current rate of home sales versus current home inventory on a scale of 1-60. An MAI value greater than 30 typically indicates a “Seller’s Market” (a.k.a. “Hot Market”) because demand is high enough to quickly absorb available supply. A hot market will typically cause prices to rise. MAI values below 30 indicate a “Buyer’s Market” (a.k.a. “Cold Market”) where the inventory of already-listed homes is sufficient to last several months at the current rate of sales. A cold market below 27 will typically cause prices to fall.